It is an ideal moment to reflect on the market evolution over the last few years, and think about where it might go from here. Looking at what happens in the US is a good way to understand the industry in general, and that's what we have been doing.
"In the business world, the rearview mirror is always clearer than the windshield." Warren Buffett. CEO, Berkshire Hathaway
Firms invest in FinTech for two main reasons. The first is the potential for high returns, and the second is to create strategic partnerships. Behaviour of US firms in such investments is usually taken as a leading indicator of the industry direction worldwide, and a new report cover this.
Capital Markets, Wealth & Asset Management, Small & Medium Businesses have received the most attention over the last five years, and we see that in parallel the blockchain and crypto hype has calmed down. Additionally there is more focus generally on the other areas of FinTech.
When we consider the second reason for investment, strategic partnerships, we have seen that it can go both ways. One is to partner with the acquired FinTech over the long term to create a new offering or to improve the acquirer's own capability in that area. The second way is to acquire and then turn off, in effect stopping the competition, as has been the case with the recent BBVA US acquisition, covered in our previous newsletters.
Let this be a reminder that market hotspots come and go, and that the FinTech market especially is dynamic. We need to keep our eye on it because the times they never stop a-changin'!.